Kwong v. United States Frequently Asked Questions (FAQs)

Under the Kwong decision, some taxpayers may be eligible to recover penalties and interest assessed during the COVID disaster period (Jan. 20, 2020 – July 10, 2023).

To pursue that relief:

• Taxpayers generally must file a refund claim using Form 843

• The form is used to request a refund or abatement of those previously assessed penalties and interest

• In many cases, practitioners are filing “protective claims” — meaning the claim is submitted now to preserve the taxpayer’s rights while the case is still subject to appeal

Form 843 is the primary mechanism to claim potential Kwong-related refunds

• Relief is not automatic — a claim must be filed

• Filing preserves eligibility even if the legal outcome remains uncertain

• Obtain and review the engagement letter. Make sure the engagement letter specifically covers Kwong-related refund or abatement analysis, preparation of Form 843, transcript review, communication with the IRS and any limitations on legal conclusions or litigation support.

• Obtain executed authorization forms. Secure Form 2848, Power of Attorney and Declaration of Representative, or Form 8821, Tax Information Authorization, for the taxpayer and tax period as appropriate. Confirm names, taxpayer identification numbers, tax forms, tax years, representative information and signatures are complete and current.

• Request transcripts for all affected years. Pull account transcripts, return transcripts, record of account transcripts, and wage/income transcripts as needed. Save copies to the client file and note the transcript request date.

• Confirm eligibility. Identify tax year, tax period, form type, notice, assessment, payment and refund claim deadline that may be affected by the Kwong analysis. Confirm the issue relates to penalties, interest or other items that may be addressed through Form 843 rather than an amended return or other IRS form.

• Identify penalties and interest potentially affected. Review transcripts and IRS notices for failure-to-file penalties, failure-to-pay penalties, estimated tax penalties, interest, and other additions to tax or charges that may have accrued during the COVID-19 disaster period addressed by Kwong.

• Quantify the claim amount. Reconcile IRS transcript amounts to client records and calculate the refund or abatement amount by year, period, and item. Separate penalties, interest and other charges so the Form 843 explanation clearly supports the amount requested.

• Evaluate filing deadline and protective claim needs. Confirm the applicable statute of limitations before filing. If the law remains unsettled or the exact refund amount is not final, consider whether a protective claim should be filed to preserve the taxpayer’s rights.

• Prepare the Form 843 package. Prepare a separate Form 843 for each tax period when required. Complete taxpayer information, claim amount, tax period, type of tax or fee, applicable penalty or interest item and the explanation section with a concise Kwong-based narrative and supporting facts.

• Draft the supporting statement. Attach a clear statement explaining the basis for relief, including the affected deadline, assessment or payment history, penalties and interest requested for refund or abatement and why the claim is being made under the Kwong analysis.

• Attach supporting documentation. Include executed authorization forms if needed, relevant IRS notices, transcripts, penalty and interest computations, proof of payment, prior correspondence and any other documentation needed to substantiate the claim.

• Perform quality review before sending to taxpayer. Verify names, addresses, taxpayer identification numbers, periods, amounts, signatures, dates, mailing address and attachments. Confirm the claim package is internally consistent and that the taxpayer understands the request may be subject to IRS review or later legal developments.

• Send filing instructions to taxpayer. Provide the completed package and instruct the taxpayer to file by USPS Certified Mail with Return Receipt Requested, unless another filing method is specifically required. Include the correct IRS mailing address and remind the taxpayer to retain proof of mailing and delivery.

• Maintain the client file and follow-up schedule. Save the final signed Form 843 package, attachments, certified mail receipt, delivery confirmation and follow-up notes. Calendar expected IRS response timing and any refund claim or litigation-related deadlines that may apply after filing.

Kwong v. United States (Kwong) is a 2025 ruling by the U.S. Court of Federal Claims that examines mandatory tax relief provision under former Sec. 7508A(d) (relating to the postponement of tax and payment deadlines due to federally declared disasters) during the COVID-19 pandemic.

The taxpayer in Kwong filed penalty abatement requests for certain tax years, but the IRS disallowed such requests in late 2020. When the taxpayer filed a petition in February 2023, the IRS argued that the period to file had ended. However, the court held that the taxpayer could timely file until at least July 10, 2023, because former Sec. 7508A(d) extended the time for filing during the entire national emergency, which began on Jan. 20, 2020, and ended on May 11, 2023, plus 60 days.

Note that the potential for “indefinite” mandatory tax relief was fixed in November 2021 when Congress amended Sec. 7508A(d) to provide mandatory tax relief for 60 days from the start of the federally declared disaster. Also, legislation enacted in 2025 increased the mandatory period from 60 days to 120 days.

Refund claims are subject to statutory limitations periods. Under Sec. 6511, a refund claim generally must be filed within three years from the date the return was filed or within two years from the date the tax was paid, whichever comes later.

The Kwong court held that Sec. 7508A provided a mandatory tax filing and payment extension from Jan. 20, 2020, to July 10, 2023. If a taxpayer’s statute of limitations ended during this interval, it was extended to July 10, 2023. Similarly, if the statute of limitations began to run during this interval, the Kwong holding would treat the statute of limitations as having begun on July 10, 2023, and ending on July 10, 2026.

Taxpayers may be entitled to refunds or abatements of penalties and interest that the IRS assessed during the COVID‑19 federal disaster period. The relief arises from recent court decisions, particularly Kwong, which interpreted disaster‑related deadline postponement rules more broadly than the IRS previously applied them.

Taxpayers should evaluate whether they remain within the applicable refund window and consider whether filing either claims for refund or abatement of penalties and interest or protective claims are appropriate, especially given the uncertainty of whether the Kwong decision will be appealed.

Under former Sec. 7508A, filing and payment deadlines were automatically postponed during a federally declared disaster period, plus 60 additional days. The court held that COVID‑19 constituted a continuous federal disaster from Jan. 20, 2020, through May 11, 2023, extending the postponed deadline period to July 10, 2023. According to the court, returns and payments due during that time should not have been treated as late, meaning penalties and related interest may have been improperly assessed.

No. The IRS will not issue refunds automatically. Most taxpayers must affirmatively file a claim to request a refund or abatement of penalties and interest or a protective claim to preserve their rights. The National Taxpayer Advocate (NTA) expressly warns that without action, many eligible taxpayers may lose the opportunity entirely.

A protective claim preserves a taxpayer’s right to a refund while legal issues remain unresolved and resolution of the legal issues will not occur prior to expiration of the statute of limitations. Filing a protective claim may be appropriate where a taxpayer’s entitlement to relief depends on future court decisions or guidance. IRM 21.5.3.4.7.3.1(3) outlines the requirements for filing an acceptable protective claim. Once the underlying contingency is resolved, the taxpayer must affirmatively perfect the protective claim; without further action, the IRS generally will not act on the claim.

For most taxpayers, refund claims must be filed by July 10, 2026. This deadline is critical — missing it may permanently bar recovery of penalties and interest paid during the COVID‑19 period.

Potentially affected taxpayers include individuals and businesses that:

• Filed returns or made payments late during the COVID‑19 period

• Paid failure‑to‑file, failure‑to‑pay, or related penalties

• Paid interest attributable to those penalties

• Filed returns or made payments that were due at any point between Jan. 20, 2020, and July 10, 2023

Taxpayers should weigh the potential benefit against the cost and effort involved. Factors to consider include the amount of the penalty, the likelihood of recovery, the potential cost of settling or litigating the refund claim, and the taxpayer’s broader compliance posture. For larger penalties, it may be worthwhile to explore refund claims or other protective measures.

Note that a class action certification petition has been filed for an issue that may impact a substantial number of taxpayers. In Fleisher v. United States, the plaintiffs are alleging that the IRS owes taxpayers interest on overpayments that were filed beyond the grace period offered in various IRS notices issued during the COVID-19 pandemic. Given that this type of claim involves interest accruing on taxpayer refunds over a period of months, practitioners may strongly consider the factors above.

Protective claims preserve refund rights before the statute of limitations expires; however, protective claims also require the taxpayer to perfect the claim once the contingency is resolved. A protective claim is perfected by notifying the IRS and substantiating the refund claim with the relevant facts, calculations, and explanations. Determining whether the contingency has been resolved can be challenging because it depends upon whether the IRS will continue to litigate the issue in other venues. If the taxpayer does not timely perfect the claim, the IRS may disallow the claim.

Refund claims are appropriate where the taxpayer understands that the IRS may deny the refund or abatement claim and may need to pursue litigation. If the taxpayer files a refund claim, the IRS can approve, deny, or not act. If the IRS denies the refund claim, the taxpayer has 2 years to challenge the IRS’s denial. The taxpayer then has two options:

• Appeal the decision with the IRS Independent Office of Appeals, which does not stop the 2-year statute of limitations to file suit, unless the IRS agrees to extend the deadline.

• File suit within 2 years of the IRS’s notice of disallowance.

Protective claims provide the benefit of preserving refund rights without immediately triggering litigation risk, but they require ongoing taxpayer action to perfect and manage the claim. Refund or abatement claims provide procedural finality and access to IRS Independent Office of Appeals or the courts, but the IRS’s disallowance starts a 2‑year clock within which the taxpayer must be prepared to litigate. Ultimately, the taxpayer should consult with their practitioners to determine the most appropriate course of action depending upon the taxpayer’s facts and circumstances.

The NTA highlights that this situation risks unfair outcomes:

• Well‑advised taxpayers may recover refunds

• Uninformed taxpayers may lose benefits entirely

• This undermines fundamental taxpayer rights, including the right to pay no more than the correct amount of tax and the right to be informed.

This represents a time‑limited, high‑impact client opportunity:

• Large population affected

• Clear statutory deadline

• Meaningful cash refunds for clients

• Opportunity to demonstrate proactive advisory value

Lack of information is a major barrier—something CPAs are uniquely positioned to address.

A practical triage approach may include:

• Reviewing client transcripts for penalties and interest posted between 2020–2023

• Flagging clients who requested penalty abatement but were denied

• Identifying clients that filed late returns or made late payments during COVID‑related disruptions

• Looking at amended returns or payment plans initiated during that timeframe

Practice tip: This review can be system‑driven and scaled across client populations.

For clients, this may mean:

• Refunds of cash previously paid

• Reduction or elimination of assessed balances

• Resolution of lingering compliance issues

• Restored confidence in the tax system

For many clients, this is unexpected money tied to past distress — making it particularly impactful.

From a member enablement perspective:

• This is consistent with a CPA’s obligation to exercise due care and remain informed of changes affecting clients

• It aligns with ethical expectations to advise clients of significant benefits for which they may be eligible

• Documentation of eligibility analysis and claims filed will be critical, particularly given the likelihood of future litigation or IRS appeals

Key client‑facing messages might include:

• “There may be a limited‑time opportunity to recover penalties and interest paid during the pandemic.”

• “The IRS will not issue refunds automatically.”

• “Action is required by July 10, 2026.”

• “We can help determine eligibility and file claims for refund or abatement of penalties and interest or protective claims where appropriate.”

Use this customizable email template to helps clients understand the evolving implications of the case.

Not entirely. The government could appeal the Kwong decision. The IRS could try to receive a more favorable opinion in other venues. Future guidance or legislation could also affect outcomes. However, the NTA emphasizes that protective refund claims are essential to preserve taxpayer rights while legal uncertainty remains. Likewise, taxpayers may consider filing refund claims if they are willing to appeal or litigate a refund claim denial.